Short-term business loans can give your business the fast cash it needs to bridge cash-flow gaps, handle emergencies and unexpected expenses, or take advantage of a business opportunity. Think of them as quick-turnaround loans: Borrow what you can pay back relatively quickly so you can focus on running your business rather than managing debt.
Short-term business financing generally has higher borrowing costs than traditional bank loans and some alternative financing options with longer terms. That’s because short-term loans typically have looser qualifications, faster funding and shorter repayment time frames, between three and 36 months. Read more about the perils of short-term business loans below. But they can be a good option when you’re in a temporary bind.
You can choose between a short-term loan or a short-term line of credit. Lines of credit are more flexible and generally have shorter repayment periods than short-term loans, making them more suitable for managing cash flow. Here are short-term financing options from online business lenders.
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There’s one key advantage to repaying a short-term business loan on time: It can help you qualify for a less expensive long-term business loan in the future. You may want a long-term loan — five to 15 years or longer — for a real estate purchase, business acquisition or debt refinancing.
Short-term lines of credit
If you need to bridge cash-flow gaps: Kabbage and Bluevine
A Kabbage line of credit is a good option for borrowers with bad credit. Although Kabbage does check your personal credit score, it doesn’t weigh the score as heavily as other factors, such as your average monthly revenue. Borrowers can get fast access to up to $100,000, and it’s fairly easy to qualify (see the minimum qualifications below). Each draw on the line of credit is repaid over six or 12 months.
The ease of qualifying comes at a cost, because Kabbage’s line of credit carries a higher annual percentage rate than other lines of credit.
BlueVine is a good option for businesses with a limited operating history. The lender requires a minimum of six months in business, with borrowing limits ranging from $5,000 to $100,000. You repay draws on BlueVine’s line of credit weekly over six months. It’s less expensive than Kabbage and has APRs ranging from 16% to 62%. Approval takes an average of 12 hours, while funding typically becomes available to borrowers within 24 hours. However, borrowers will need good personal credit — a minimum score of 600 — and at least $60,000 in annual revenue to qualify.
- Loan amount: $2,000 to $100,000
- APR: 24% to 99%
- Loan term: Repaid over six or 12 months
- Funding time: A few minutes to several days
- Read our Kabbage review.
- Loan amount: $5,000 to $100,000
- APR: 16% to 62%
- Loan term: Repaid over six months
- Funding time: As fast as 24 hours
- Read our BlueVine review.
If you’re looking for low rates: Lending Club
Lending Club’s line of credit carries an APR of 8% to 35%, the lowest rates compared with Kabbage and BlueVine. It’s also a good option if you need to borrow a large amount; the lines of credit max out at $300,000. You repay draws monthly over as long as 25 months, but you can pay off the line of credit earlier to save on interest, with no prepayment penalties.
Lending Club, however, is likely the hardest to qualify for. Like BlueVine, you’ll need a good credit score — at least 600 — but you’ll also need annual revenue starting at $75,000 and two years of business history to qualify. Funding also takes a bit longer than BlueVine and Kabbage, but it typically comes through in less than a week.
Line of credit
- Loan amount: $5,000 to $300,000.
- APR: 8% to 35%.
- Loan term: Repaid up to 25 months.
- Funding time: Less than a week.
- Read our Lending Club review.
Short-term business loans
If you have at least one year in business and need fast cash: OnDeck and StreetShares
OnDeck’s term loan is a good option for small-business owners who need fast cash for a small expansion or short-term project, such as a marketing campaign. The lender provides short-term business loans to be repaid daily or weekly over three to 36 months. Funding is fast, typically arriving in a few business days. However, OnDeck’s APRs range from 9% to 99%, with an average APR of 43%, which is more expensive than your other short-term loan options.
To qualify for OnDeck, you’ll need a personal credit score of at least 500, a year of business history and $100,000 in annual revenue. Also, your business must not be on the OnDeck restricted industries list, and you can’t have had any bankruptcies in the past two years.
One lower-cost alternative to OnDeck is StreetShares. It has a lower minimum annual revenue requirement of $25,000 and offers weekly repayments. The funding time is similar to OnDeck’s. StreetShares also doesn’t charge a prepayment penalty, so you can repay the loan early to save on interest.
On the downside, funding amounts are capped at 20% of your annual revenue. For example, a business with $300,000 in revenue could qualify for a maximum of $60,000 in financing. You’ll also need strong personal credit (600-plus) and a year or more in business to qualify with StreetShares.
- Loan amount: $5,000 to $500,000
- APR: 9% to 99%
- Loan term: Repaid daily or weekly for three to 36 months
- Funding time: As fast as 24 hours but typically a few days
- Read our OnDeck review.
- Loan amount: $2,000 to $100,000 (capped at 20% of annual revenue)
- APR: 9% to 40%
- Loan term: Three to 36 months
- Funding time: One to five days.
- Read our StreetShares review.
If you have strong credit and want low rates: Credibility Capital and Bond Street
Credibility Capital and Bond Street offer lower rates than OnDeck and StreetShares. To qualify, you’ll need strong credit and business revenue.
Credibility Capital’s term loans range from $10,000 to $350,000, with APRs between 10% and 25%. Credibility Capital is best for strong-credit borrowers; the lender requires a minimum 650 personal credit score. Borrowers receive funds in seven days on average.
If you need to borrow more than $350,000 or need funding a bit faster, consider Bond Street. The lender provides between $10,000 and $1 million and carries similar costs to Credibility Capital. Funding typically only takes three to four days compared with Credibility Capital’s seven days on average. Qualifying with Bond Street requires at least two years of business history and a minimum of $200,000 in annual revenue, compared with one year in business and $100,000 in annual revenue at Credibility Capital.
- Loan amount: $10,000 to $350,000
- APR: 10% to 25%
- Loan term: One, two or three years
- Funding time: Seven days on average
- Read our Credibility Capital review.
- Loan amount: $10,000 to $1 million
- APR: 8% to 25%
- Loan term: One to three years
- Approval time: Average of three to four days
- Read our Bond Street review.
The pitfalls of short-term business loans
There are a few disadvantages to short-term business loans:
Higher cost: They typically carry a higher APR — the total annual cost of borrowing, including all fees and interest — than long-term loans. That’s due to their shorter repayment period, faster funding, looser qualifications and the fact that many are unsecured business loans, which don’t require collateral. Use NerdWallet’s business loan calculator to figure out how much a loan will cost you.
Risk of debt trap: The speed and ease of short-term business loans can become addictive. Instead of repaying the debt in full, business owners may be enticed to refinance and roll over the debt into a new loan. This can result in a debt trap: continual refinancing just to keep up with payments. This is a common issue with merchant cash advances, a costly form of short-term financing. If you have several high-interest small-business loans, business debt consolidation may be the solution you need.
More frequent repayments: Lenders may require you to make loan payments daily or weekly as opposed to monthly. Although these payments are smaller, their frequency can be an issue for businesses that have uneven sales or don’t always hold much cash in a bank account. You’ll have to make sure you have enough money in your account to make the payments at all times, or you’ll risk incurring fees or defaulting on the loan.
Short-term business loans: Summary of options
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Find and compare the best small-business loans
NerdWallet has created a comparison tool of the best small-business loans to meet your needs and goals. We gauged factors including lender trustworthiness, market scope and user experience, and arranged them by categories that include your revenue and how long you’ve been in business.
Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.
Updated Feb. 24, 2017.